Bond Market Update

Opening Gains Defended

• U.S. Treasuries trade a bit above their opening levels with issues in the belly showing relative strength. The trading day started on a higher note amid uncertainty related to a potential weekend government shutdown with Treasuries building on their early gains in reaction to the Personal Income/Outlays report for November. That report showed cooler than expected growth in Personal Income (0.3%; Briefing.com consensus 0.4%) and Personal Spending (0.4%; Briefing.com consensus 0.5%) as well as the core PCE Price Index (0.1%; Briefing.com consensus 0.2%). However, the core PCE Price Index growth remained at 2.8% on a year-over-year basis. Treasuries inched down from their post-data highs during the past hour, but they continue trading above their starting levels, having shown limited reaction to the final reading of the Consumer Sentiment Survey for December.
• The final University of Michigan Index of Consumer Sentiment for December held steady at 74.0 (Briefing.com consensus 74.2) from the preliminary reading. In the same period a year ago, the index stood at 69.7.
  • The key takeaway from the report is the understanding that consumers are expecting future price increases for large purchases, which is driving a pickup in current buying conditions.
• Yield Check:
  • 2-yr: -4 bps to 4.28%
  • 3-yr: -6 bps to 4.28%
  • 5-yr: -7 bps to 4.36%
  • 10-yr: -5 bps to 4.52%
  • 30-yr: -2 bps to 4.72%